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Bedrock of the Community
Australia
21788 Posts |
The only documentation that I keep are the invoices for more valuable coins (say over $100). Invoices can be important to prove the provenance of a coin. The most important information of all is what I write on each 2x2 holder. In each case, that includes a full attribution, when and where is was obtained, and for how much.
If you sell an item, say, 15 years later, you can multiply the original purchase price by the inflation factor over the period of time, and so determine if you make a real profit or loss on the item. Inflation information is readily obtainable from your Country's bureau of statistics. A check on current market prices gives you another line of information.
If you want to be strictly legal, a capital gains tax of some sort should be paid, to which an inflation figure is taken into account. This sort of problem can arise when an estate is wound up. Tax authorities don't usually worry about small coin collections, but they can and do take real interest if an investment portfolio of coins is liquidated.
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Pillar of the Community
United States
2130 Posts |
Very good explanation Carmykle! That brought back lots of memories from Principals of Accounting 1 & 2!
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Pillar of the Community
 United States
2448 Posts |
I hated Cost Accounting! That's why I went back to aviation and aviation safety.
Sel691, I'm not familiar with the GAAPs for Australia, but if you are in business to sell coins for profit, you have licence and any profit is ordinary income. For the dealer, this should not be susceptible to capital gains. As a dealer with a private collection is a different matter as is estate planning. If you have a big collection, get a good number cruncher and planner.
Edited by carmykle
09/16/2010 10:57 am
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Valued Member
United States
397 Posts |
As an accountant, the only thing I would add to carmykle's explanation is that when a sale is recorded - the debit is to cash, credit inventory, and credit income. Things can actually get a bit more complicated as proper GAAP accounting would require a cost of goods sold account. Income is then closed to owners' equity on a periodic basis.
The basic explanation is correct though.
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Bedrock of the Community
United States
17884 Posts |
Quote:
I hated Cost Accounting! That's why I went back to aviation and aviation safety. I actually found accounting kind of interesting. I wouldn't mind going back and picking up a refresher course. |
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Pillar of the Community
United States
2661 Posts |
This is what I get out of reading the IRS tax codes when buying and selling coins. If you $50 for a coin (even if it is worth $100) and sell it for $100, you must claim the $50 profit as capital gains and pay taxes on that $50 accordingly. If audit, you will be required to show proof of purchase price as well as selling price. I may be wrong, but that is the way I understand it.
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Bedrock of the Community
Australia
21788 Posts |
carmycle: I was really looking at the subject from the standpoint of a collector with valuable items, or an investor.
Actually, my son is an accountant, and he tells me that Australian accounting standards are very similar to those in the U.S., and there is a trend towards a single global accounting standard.
So far as an Australian investor is concerned, if an item is held for more than one year, and was over $100 at the time of purchase, a Capital Gains Tax has to be paid when the item is sold. That helps to explain why I limit my individual purchases to less than $100. A dealer is does not pay a capital gains tax, because he has a trading licence, and normally most of his stock would be turned over within 12 months anyway.
When the calculation of capital gains tax is applied, an inflation factor taken into account, and is subtracted from the selling price. A proportion of the nett profit is taxable, depending on a sliding scale of your income level for the year in which you sell the item. The Capital Gains Tax Law came into effect in about 1987, and there is no Capital Gains Tax applicable on any item purchased before that date, irrespective of the value.
The Australian Taxation Office (ATO) has software designed to match large sales against income, and has the ability to catch a lot of people who try to ignore the sale of large coin collections, and ignore paying Tax.
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Bedrock of the Community
United States
20753 Posts |
I too tried some accounting classes in college and after that, knew full well that it was for someone else. I'll stick to Chem and electronics any time. Much simpler and no IRS people to worry about. For tax time I just hand over STUFF to a tax guy and he does everything. I just sign where he puts an X and forget all that STUFF.
As to how coin dealers document anything, I suspect the greater majority of them do not document anything. Possibly the only ones are the ones that have an actual coin store, hobby store, etc. All the others for tax purposes don't really exist.
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Pillar of the Community
United States
2448 Posts |
Wie, since you are not in business to make a profit from your coins, you are doomed to pay short or long term capital gains on coins as an investment; especially if there is a track record. You can deduct from the final selling price fees, interest, mail costs, insurance, storage, and dealer appraisals to offset your income from sale. Even if you don't report the sales, if the dealer you sell to does, you can be in a bit of a spot if a substantial amount of money changes hands. I don't remember which block on the 1040 it is, but each year your are asked by the "code" if you sold coins or antiques during the year. I forget the dollar amount that should be reported. Keep your receipts. And any further question should be sent to Waredo.....I'd love 10%....it's deductible. Of course you can always be like my father; he always thought it was cheaper to move than pay rent.  |
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Bedrock of the Community
Australia
21788 Posts |
carmycle: Some folks get into and out of prospective careers early in their life.
I started as a civil engineering draftsman, and decided I would like to progress into engineering surveying. I studied all of the 4 year course for the surveying, except the final year field practicals. It was at that time that I went to Manchester, England for 2 years. I was doing some field work there in late November, when a storm blew in from the North Atlantic. Being an Aussie and lightly clothed, I just froze I tried to think back to Oz, with temperatures in the 90's. It just didn't work, I still froze!
When I got back to Oz, I was in the field in stinking hot weather, and I resolved that surveying was not for me! I went into civil engineering proper, designing storm water systems, road design, building services design and environmental engineering. Far more satisfying and comfortable for me!
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Bedrock of the Community
United States
17884 Posts |
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Even if you don't report the sales, if the dealer you sell to does, you can be in a bit of a spot if a substantial amount of money changes hands. And once that new 1099 form reporting goes into effect thanks to the Healthcare reform bill, there will be records if you go over $600 in a years time. |
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Valued Member
United States
397 Posts |
It's all on Schedule D. Coins (and other collectibles) are considered capital assets. When you dispose of those assets, you are required to report any gain or loss - based on the difference between the acquisition price and the disposal price.
Whether or not an individual is provided with a 1099, the disposal must still be reported. With the advent of the new laws taking effect in 2012, fewer people will be able to forget to report this income.
You can buy stuff from a dealer all you want - that won't trigger anything (unless you purchase more than $10,000 at a time).
However, if you sell to a dealer - if you ever reach $600 in a year, that dealer will send you a 1099 at the end of the year. Don't think that a dealer's compliance with this law will be low. Any dealer that deals in bullion is already licensed by several entities, all of which require an annual financial audit by a CPA. That CPA will require the dealer to send out all the appropriate tax forms before the audit can be signed and made official. No audit - no more business. So the dealer will comply with the law.
So, you, as an individual have a few options. One) Don't sell anything. Two) Sell only to small-time dealers that don't sell bullion. Three) Only trade with other collectors. Four) Do not sell more than $599 worth of anything to any one dealer in a year.
However, the best solution by far, and the only one I recommend to everyone is: Five) Sell your items to reputable dealers (thereby getting the most you can for your items), report everything properly, and pay your taxes.
***I am not a CPA. I recommend you get a CPA and follow their advice. I recommend you follow all applicable laws in your jurisdiction. I do NOT recommend trying to get around or not follow any law. Solutions 1-4 mentioned above are common knowledge and are NOT endorsed by me.
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Pillar of the Community
United States
2448 Posts |
Darn, there goes my 10% waredu! Sel, I completely understand. Been in similar situations and took the road less traveled because it was easier, paid more, and no one realized it yet. Had a chance to see OZ but I blew it and went to Tokyo, the Philippines, and Penang instead. Brought home a great number of coins from the late 60's but lost most of them. Although, I still have a lot of Aussie Coins from the guys I met in SE Asia. Maybe I'll visit next year.
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Bedrock of the Community
Australia
21788 Posts |
carmycle: My daughter in law is a San Diego native and has lived in Sydney for the last two years. She reports that she has had to make no cultural, climatic or accent adjustments at all to live here.
Probably explains why San Francisco and Sydney call themselves 'Sister Cities'.
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Pillar of the Community
United States
2448 Posts |
Wow, that's a revelation Sel. I would have expected Sidney to be more concervative. Of course every city in the US is more conservative than San Francisco. Sometimes it's refreshing, and some time I just scratch my head over their policy and ideas.
Sorry for getting off thread. G'day!
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Posted 09/16/2010 08:59 am
